Abood raises major concern with 1 area of QAR legislation

Responding to the QAR legislation announced on 27 March, the Financial Advice Association Australia (FAAA) drew attention to recommendation 7, which outlines revised requirements for superannuation fund trustees processing financial advice fees.

Namely, the legislation sets out a number of requirements that need to be satisfied before a trustee can charge the cost of advice against the member’s interest in the fund.

Among the requirements is an assurance of an unspecified kind that the financial product advice is personal advice and is wholly or partly about the member’s interest in the fund, and that the amount charged does not exceed the cost of providing financial product advice about the member’s interest in the fund.

The legislation also outlines that a trustee is not required to agree to the member’s request to charge the relevant costs even when the requirements are satisfied.

“A trustee could decline the member’s request if in their view it does not relate to the member’s beneficial interest in the fund or if charging the cost would be inconsistent with the trustee’s other regulatory obligations,” the explanatory memorandum reads.

Responding to these inclusion, FAAA chief executive officer Sarah Abood said the group has “strong” concerns.

“This legislation places specific obligations on them [super fund trustees] before advice fees can be paid (under a new sub-section, 99FA, of the Corporations Act). There is no clarity as to how these obligations will be met by trustees,” Abood said.

“The risk we see is that this could cause significant extra work for financial advisers who may be asked to provide additional specific documentation, such as statements of advice and invoices.”

Abood warned that this will also require onerous processing by trustees.

“There are also questions about how advisers will reconcile their duties around privacy and client data protection with the requests trustees may make. This area requires more work to ensure obligations can be met efficiently and effectively,” the CEO explained.

“We will continue to work with members over coming weeks on the implications of these changes for their businesses, as we finalise our views and respond to the inquiry being undertaken by the Senate economics committee.”

Touching on the remainder of the legislation, Abood said: “It’s good to see that this legislation addresses a number of the concerns that we identified in the draft legislation released in November 2023.”

These include the ability to mandate a standardised fee consent form and the specific recognition that fee consent can be provided electronically, as well as flexibility that allows advisers to bring forward anniversary dates for client renewals.

Abood added that the FAAA is expecting to see the second tranche of legislation, which was released in December, put forward to Parliament in mid-2024.